Oil & Gas UK Economic Report 2015

5.4 Cost and Efficiency: Achievements to Date

As reported, £9.7 billion was spent in 2014 operating the UKCS. When considering the impact of the current cost and efficiency drive, the costs of operating existing assets are expected to fall by 22 per cent by the end of 2016. This involves significant cost reductions by the existing business of almost £800 million (eight per cent) this year and a further £1.3 billion (14 per cent) next year. However, as a number of new fields will be brought on-stream over the next two years, some of this gain will in part be offset. As a consequence, total operating expenditure is expected to fall to £9.3 billion this year and fall further to £8.6 billion next year. Extensive work was carried out to improve asset performance in response to the sharp fall in production over the period 2010 to 2013, which led to significant increases in operating cost. This investment is now

Early improvements in the cost and efficiency of operations on the UKCS are already apparent. The portfolio of assets is constantly evolving as new fields start up and some old fields are decommissioned. Typically, fields perform better in their early years before production comes off plateau and more regular maintenance interventions are required. New start-ups usually have a positive impact on UOCs, which, when looked at on a UKCS basis, can mask problems experienced in some of the older assets. One of the aims of this report is to unpick the impact new start-up fields have on production and operating costs to investigate how well the industry is doing in reducing costs and maintaining production in its existing assets.

Figure 15: Changes in Operating Costs (New versus Existing Fields)

10.0

Reduction from Existing Fields Contribution from New Fields

9.7

9.5

9.3

9.3

9.0

8.9

8.6

8.5 (£ Billion)

Total Operating Costs

8.0

8.0

0

2014/15

2015/16

Source: Oil & Gas UK

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ECONOMIC REPORT 2015